Speaking with both CEO Mike Creedon and Chairman Ken Ford on the back of the 2016 preliminary numbers which saw adjusted pre-tax profits jump to £1.3m, both sounded optimistic on the performance whilst adding that the first few months of the current year had begun very strongly.

SDI for those that are unfamiliar is fast developing into a vastly different business of that from a few years back, the company having acquired two game changing businesses in the form of Sentek and more recently Astles.

This has given the business much more depth and scope for growth that has resulted in a welcome reduction on a reliance from its Synoptics arm which having once accounted for 75% of revenue has now fallen to 46% and will in the current year shrink further to 41%.

Commenting on Sentek, Creedon says that it had an excellent year which came out ahead of the board's expectations and saw the division contributing a first full year to the group.

Sentek's sales came out at £2.9m representing impressive growth of 30% on a pro-forma basis and which in turn delivered some 27.4% of total group revenue.

The division manufactures and sells single use-electrodes for the measuring of ph and conductivity of aqueous solutions in either a flowing or stationary state and serves a wide range of end markets such as laboratory's, bio-pharma, food production and leisure, the latter of which takes in swimming pools.

Creedon adds that they have been absolutely delighted with this acquisition as it made further progress through a year that was driven by new customers such as a major Swimming Pool company, along with increased demand from its largest healthcare customer for blood gas analysers.

Astles, which designs and supplies chemical dosing systems that largely serve two-piece beverage can manufacturers is also seemingly slotting in well and pleasing the board, where with a distinct sales leaning to European Asia-Pacific markets it reported pro-forma growth of 19% which translates into sales of £2.25m.

Other existing divisions also performed solidly, with the Atik Camera arm once more gaining traction where it is focused on high sensitivity cameras for the life science industry alongside astronomy markets.

During the period, this business entered into an agreement with one of the world's leading life science companies for a new product and this is expected to benefit the division's revenues in full year 2018.

Creedon says that the most pleasing aspect in the total group performance is that all divisions are now profitable with good cash generation to boot, which is something that has eluded the company in the past.

“We are also continuing to keep a close eye on controlling costs and have benefited from the previous changes and reorganisation that we implemented, so overall, things are certainly going well”

As a CEO who always appears to have his feet firmly on the ground and tell it very much as it is, a more notable upbeat tone on SDI's Pro-Reveal device is also perhaps worth noting.

The patented device which the company manufactures through its Synoptics health brand is an automated imaging system and spray test that can detect microgram amounts of potentially lethal protein left on surgical instruments after the hospital decontamination process and is by all accounts leading the field.

The device has actually been around since 2013 and initially on launch was behind a sudden spike in SDI's share price on the back of market excitement and the anticipation of major sales being delivered.

However, the lumbering mechanics of the NHS and a wider sector malaise and indifference led to muted interest and an absence of sales.

In previous conversations with both Creedon and Ford there was an honest realisation and admission from both that despite the undoubted merits of the device, adoption was going to be a hard slog, Creedon once commenting that if it did come good, Pro-Reveal would be the icing on the cake.

However, having largely been written of by many, last year there was something of a potentially major game changer as news broke in the summer that guideline changes issued by the Dept of Health had raised the bar on stated acceptable protein levels on surgical instruments and the way they can be measured and addressed which potentially, could be hugely beneficial for Pro-Reveal and in turn SDI.

This means that by next year, protein levels on surgical instruments should be measured directly on the surface of instruments as opposed to existing swabbing or other methods being used and where at present only SDI can deliver this.

That decision, subsequently led to trials being conducted by NHS Hospitals in the UK and has since led to eight system sales to teaching Hospitals specialising in neurology and orthopaedics being made.

Creedon says that things are now beginning to happen for Pro-Reveal and for a first time in our speaking the CEO sounds upbeat on prospects for the device where he adds that the company is currently waiting to hear whether there will now be a centralised procurement by the DOH which is extremely keen for NHS Hospital trusts adopt new technology.

Although the potential UK market for Pro-Reveal is not massive, it would nevertheless make a marked contribution to the wider group and importantly would provide for some very welcome and handy recurring revenues.

The current UK sales estimate potential for the Pro-Reveal device according to finnCap is between £1.5m and £2m but expanding on this Creedon says “those figures would be for one off capital equipment sold in the UK, but you then have to include repeat business ie, the spray and calibration kit. Actual numbers at this stage is difficult to forecast, but it would generate say around £300k-£500k per annum, but importantly is very high margin”.

However the device's prospects are certainly not confined to the UK as Creedon also points out that they have over the last year made a number of notable sales in the US and Pro-Reveal is now being trialled with a number of healthcare group purchasing organisations.

“Significant sales could arise from the US, but again it is difficult to predict the total market size or the level of interest, but they do have the same issues on dirty surgical instruments”.

Clearly the potential in the US is there and it's a much larger opportunity than the UK and collectively it isn't difficult to imagine the potential for meaningful sales revenue and a very decent recurring revenue stream.

Additionally, the company now has a new commercial team and distributors are being appointed in Europe and Asia Pacific, which leads finnCap to anticipate sales to grow substantially from this base, pencilling in sales for the current year from Pro-Reveal of £0.5m.

Interestingly, the Scottish DOH has very recently specifically named the SDI device in a lengthy document around the guidelines of decontamination which should bring it to the immediate attention of Hospitals that now need to act.

Back to the wider group, there is also the much smaller Opus Instruments which is focused on infrared cameras for the art conservation market with major art galleries as clients.

Although revenues in this division were flat at £0.3m, the business has more recently located to the Atik operation in Norwich and on conjunction with that team is developing a higher specification version of its first generation Osiris camera which is expected to launch next year. Creedon says that although small, the arm does throw off cash and sales are now expected to increase to £0.4m for the full year in progress.

Looking ahead to the forecast full year numbers, finnCap which currently has a new 30p target price has pencilled in adjusted pre-tax profits of £1.9m and which is expected to see a closing net cash position of £1.9m. This is forecast to move to £2.1m and a much healthier £4.1m by next year as the strong and healthy cash generation begins to deliver tangible results.

Whilst that sees the stock at the current 23p price trading on a PER of 13 falling to 11, there are two additional factors that may prove these estimates as being conservative.

Firstly, given the strong start already made and the positive steps taken on new products and launches there is clearly scope for some upside potential that is also boosted by the weaker pound as close to 70% of sales are generated away from the UK.

Secondly and importantly is the potential of another complimentary acquisition being concluded that would also provide for increased earnings.

Both Creedon and Ford have once more repeated that the strategy for growth is to acquire further targets of which there appear to be a few in play.

However, whereas the previous purchases were funded through placings which in the short term has reduced EPS growth due to the effect of dilution, the next will according to Creedon be undertaken differently. “We are certainly aware of the dilution effect and don't really want to do that even though we know that if we did opt for that it would be well supported.

Our next purchase will very likely be be executed through using some of our own cash along with taking on some debt”.

Although this may imply a smaller purchase than the previous two, given the board's apparent eye for selecting well and successfully bedding in, then shareholders should be optimistic on any deal that is concluded.

SDI is increasingly looking like a mini Judges Scientific a company that has served its shareholders very well over the years and if it can continue to move forwards then the shares that have tripled since my first look should have a lot more mileage in the tank.

Creedon says that in the past SDI's fortunes was largely reliant on one major division for its performance, but now it is an altogether healthier position. “If in the future one arm slips a bit, others can help pull that up and we now have a really good mix of businesses with decent prospects”.

Looking ahead, the markets SDI's operations serve appear solid and continue to grow and expand, whilst if Pro-Reveal can now push on and build sales momentum it may well prove to be the icing on the cake.